Interest income saves Rahima Food’s bottom-line

Rahima Food Corporation has bounced back to profit thanks to the interest income from its cash assets which covered the fixed costs amid no production in the last fiscal year.

The once edible oil and vegetable ghee producing company posted earnings per share of Tk0.07 in fiscal 2020-21 against its Tk1.2 losses per share a year ago.

"We have some cash that brings interest income for the company. The fixed cost that was less than the interest income for the latest fiscal year had been the main cost of the company," Shahidur Rahman,  chief financial officer (CFO) at Rahima Food, told The Business Standard.

In the first nine months of the last fiscal year, the company earned Tk83.73 lakh in interest income from its over Tk17 crore cash and cash equivalent assets, which were Tk1.64 crore and Tk20.88 crore respectively in the corresponding period of the previous year.

Its operating costs slightly dropped to Tk49.36 lakh in the July 2020-March 2021 period.

The actual change in net profit came due to the one-off accounting expense of Tk4.33 crore against capital losses on disposal of fixed assets in the previous fiscal year, which did not repeat now.

Instead, the company set aside some amount for workers' profit participation fund and taxes for the 2020-21 fiscal year.

Also, the company announced a 1% cash dividend for its shareholders other than the sponsor-directors. Its last dividend was 10% in cash for the 2012-13 fiscal year.

From edible oil refining to coconut oil production

Rahima Food Corporation went off-production around eight years ago after incurring losses for consecutive years.

In fiscal 2016-17, City Sugar Industries, a concern of City Group, a leading conglomerate of the country, acquired the sponsor shares of the listed company to be at the helm to revive the production.  

The new board of directors with their plan to produce coconut oil at the factory in the southern part of Dhaka has disposed of old machinery and are setting up new machinery in a way that would allow further product diversification in the future, according to the company's last directors' report to the shareholders.

Having some one-off gains from land sales and losses during the disposal of old machinery in the recent years and later pouring around Tk20 crore, the company got a plant that can produce up to 1 lakh tonnes of coconut oil per day out of imported raw material copra, CFO Shahidur Rahman said.

The new plant is almost ready and the company is planning to begin coconut oil production there by December-January, he added.

Responding to a question if the company would launch a new hair care brand for its coconut oil products or supply in bulk, Shahidur Rahman said, "The board will decide it and inform all accordingly."

Marico Bangladesh Ltd, a locally listed subsidiary of Mumbai-based multinational Marico, is the leader in the country's hair care product market and also belongs to the top-tier listed firms to generate maximum profits against their respective equity.

 Stock price soars since 2015

The company incorporated in the early 1990s was listed on the stock market in 1997.

Considering the face value of Tk10, its stock price collapsed to below Tk3 in 2007 and soared to over Tk80 in 2010 and 2014.

Due to the sorry state of the business, the stock price pulled back to Tk15-20 levels once in 2013 and again in 2015.

City Group's investment in the company ignited market speculation and the stock price has soared to over Tk300 since 2015.

Rahima Food stocks closed at Tk304 at the Dhaka Stock Exchange on Sunday.

At the end of June this year, Rahima Food Corporation's net asset value per share stood at Tk9.29 against the face value of Tk10 for each share.